Pivotal Australian Election Turns On the Economy and a New Tax

AUSTRALIANS must decide March 13 whether to abandon a decade-old Labor government battling recession in favor of a radical opposition party promising to impose a hefty tax on consumption.

Just days before the vote, analysts say Australia's national election is too close to call. The public seems confused, caught in a cross-fire of conflicting numbers coming from both camps on the impact of the proposed goods-and-services tax. A recent Morgan-Gallup poll showed that worry about the GST overrides even concerns over the country's troubled economy.

Labor Prime Minister Paul Keating promotes measured change and would boost the economy through capital spending on roads, railways, and education. His opponent, John Hewson, an economist who heads the Liberal-National Party, would undertake a much more dramatic series of reforms, arguing that businesses must be freed from what he calls excessive government regulation and burdens imposed by Australia's powerful unions.

Dr. Hewson would implement a 15 percent goods-and-services tax and abolish or reduce other levies on payroll, fuel, training, and pensions. He promises that the GST would save money and create 2 million jobs.

Mr. Keating has been slamming the consumption tax since it was announced as part of the opposition's "Fightback!" economic policy more than a year ago. He says it is foolish to add taxes during a recession and contends the levy will not increase employment.

"A concerned voter would have to hear all the speeches, read [the opposition's] `Fightback!' packages and the comments on them to understand whether toothpaste was going to be dearer or cheaper," says Marian Simms, senior political lecturer at Australia National University. Even the two politicians, she adds, do not fully understand the tax structure and they have not been able to communicate successfully to the voter the impacts of their tax policy.

The prime minister has successfully kept the public focused solely on the tax. But a Hewson government would also bring in a raft of other changes.

Political observers say the impact of a Hewson government would be felt in a number of areas other than the economy. Keating, for instance, stands for maintaining Australia's comfortable social safety net, one of the best in the world, but Hewson's party, known here as the coalition, would cut spending and slim down or restructure social programs, including Medicare.

"What's at stake is a civil society," says Mary Kinney, coordinator for the Women's Electoral Lobby. "Coalition policies will lead us to a divided society, increasing the gap between rich and poor. The regressive aspects of the GST, a wide range of attacks on general provisions of public services, always disadvantage those on the lower end of the social scale."

The arts community is concerned about the effect of the GST on performing arts, visual arts, and books. They worry about the future of publicly funded broadcasting and the Australia Council, which gives grants to artists, under a no-frills Hewson government.

Michael Krockenberger, spokesman for the Australian Conservation Fund, worries about Hewson's plan to meld the current Department of the Environment into a new Department of Sustainable Development. "You end up with a department that no longer has as its aim the protecting of the environment, but one that promotes development," he says.

The business community's support is divided. Small business leans toward Labor, because it fears increased paperwork under the GST. Big business likes Hewson's tough industrial relations position and his promises to deregulate the economy.

As a result Labor has been abandoning traditional policies, taking tough stands on dock reform, and shedding some of the regulations that have strangled small businesses and made foreign investors skittish. Inflation is the lowest since the 1960s.

Even so, the last decade has seen the world economy shrink and Australia's along with it. The Liberals blame Labor for the 1 million Australians out of work.

"Labor is ... in hot water all over Australia," says Ernie Chaples, a political scientist at Sydney University. "Up until a year ago, it controlled five out of six states. But it's come apart. There's been a loss of direction at the state and national level, scandals all over."

"You had a government in power for 10 years that enjoyed great success," adds Bruce Wolpe, political analyst for Hill &amp; Knowlton. "But it's suffered under the recession and has not been able to effect a recovery that was quick enough or broad enough to change the psychology of the community," he says.

"The government is out of gas in terms of having a vision for the '90s," Mr. Wolpe adds.

Despite some analysts' contentions that Hewson would bring radical change, Gerard Henderson, head of the Sydney Institute, says the two parties are closer than many think. "Both are saying Australia should be more productive and competitive and should concentrate on building an export culture. The questions of this election are: Is the GST a better form of taxes than the existing tax structure that's been forming over the last 10 years? What pace should the ongoing industrial relations changes take? Both